HMRC taking it anyway

21st April 2015

Accelerated payments were introduced by the Government in the Finance Act 2014.

HM Revenue & Customs (HMRC) have argued that in complex tax avoidance cases, payments are made on account to remove the cash flow advantage gained where tax avoidance schemes are used, which can take years to resolve. Under current rules, HMRC would have to close the whole enquiry before taking legal action to resolve a complex point.

This would affect enquiries that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) or are counteracted under the General Anti-Abuse Rule (GAAR).

HMRC would be able to issue a “Notice to Pay” for any taxpayer who has an open enquiry or where the enquiry is under appeal. The notice would require the individual to pay the disputed tax within 90 days. If the individual requests HMRC to review the notice, this will only prolong the case for another 30 days. Even where there is an open appeal the proposal is to issue the notice so disputed tax can be collected. If payment is not made by the deadline, then penalties would also be considered.

So, in summary, HMRC are proposing to seek payment of tax under dispute in these cases and to even charge penalties for late payment.

This together with the Tax Enquiry Closure Rules show the Government’s target of being tough on tax avoidance which is perceived to be schemes used by the “rich and famous” whereas the ordinary worker is subjected to tax and national insurance before they receive their net pay.

It is unlikely that Fee Protection Insurance would cover defending an Accelerated Payment Notice relating to a tax avoidance scheme. We would urge anyone reading this and not sure what to do, to speak to your accountant before you enter into any discussions with HMRC – ALWAYS!